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Some Things I Learned at the AcademyHealth Annual Research Meeting

July 6, 2009 at 4:00 am

Austin Frakt

The AcademyHealth Annual Research Meeting is a conference attended by health services researchers, health economists, health care providers, and government decision makers. This year’s meeting was held in Chicago on June 28-30. Below I list a few of the things I learned in conference sessions and other discussions.

In a session on health cost growth, M. Kate Bundorf (Stanford University) presented a paper titled “Sources of Health Care Cost Growth among the Privately Insured.” She showed that quantity, not price, plays a large role in recent cost growth. It is the dominant factor in outpatient cost growth and a significant factor for pharmaceuticals. Note that this seems contrary to my post The US Health Care Rip-Off but it isn’t. In that post I summarized research that explained why U.S. health care costs are so much higher than those of other OECD countries. Conclusion: prices are to blame, not quantities. However, that doesn’t say anything about what is driving health care cost increases. Bundorf’s work suggests it is quantity of utilization, not prices.

In the same session Michael Chernew (Harvard Medical School) presented “Variation in Health Care Cost Growth” and showed that the factors that explain variation in cost levels are different from those that explain variation in cost growth. When asked if health reform will control growth he responded that he thought it was not likely unless there are big changes in how payments are made (e.g. via accountable health organizations). The health care cost growth problem is one faced by many nations. It is a hard nut to crack. Other health economists with whom I spoke at the conference concur.

I attended a session on how to communicate research to journalists. Speakers included blogger Matthew Holt (The Health Care Blog), reporter Careen Hawn (healthspottr.com) and reporter Ceci Connolly (The Washington Post). I learned a few things that may help me promote this blog but I doubt very much I’ll be talking to reporters any time soon about my academic research. It’s just not that hot.

The last session I attended before heading to O’Hare to wait for my delayed flight was on antitrust in health care. Participants were economists Deborah Haas-Wilson (Smith), David Dranove (Northwestern), H.E. Frech (UC Santa Barbara), and attorneys Henry Allen and Chul Pak. The discussion included commentary on the high degree of concentration in the health insurance market (as reported by Zachary Roth of Talking Points Memo) and an interesting comment by David Dranove about insures with monopsony power. An insurer with such power can purchase health services at lower prices than in a competitive market. A provider receiving a price below their costs will cut quality. However, a cut in quality affects all individuals who obtain services from that provider, not just individuals who are policypolicy holders of the the insurer with monopsony power. Put another way, quality is like a public good and the monopsony insurer imposes a negative externality by inducing lower quality for everyone.

These comments on market power exhibited by health insurers are relevant to health reform. It has become standard rhetoric by those promoting reform that we need insurers (and a public one) with substantial market power to drive down provider prices. We seem to have that now, only with a concentrated insurer market those lower prices are not passed to consumers. Would we suffer from poor quality, as Dranove suggested, under a monopsony purchaser (like single payer)? It is at least theoretically possible.

All in all, it was an interesting conference. I learned a lot more than I described above but the rest is nitty-gritty I won’t bore you with (assuming I haven’t already).